Welcome to fourth edition of The Wealth Builder Carnival. The purpose of this carnival is to collect articles from the blogosphere on building, preserving and keeping enough wealth for a comfortable retirement. For reference, I have tried to keep the carnival content tightly focused on wealth building. As a result, this carnival did not include submissions that were off topic, e.g. those about debt, debt management, debt reduction, credit scores, credit monitoring, credit card evaluations, or account opening bonuses.

For this carnival, I have organized the posts into seven categories: Earning, Investing, Insuring and Protecting, Living Frugally, Retiring, Saving and Taxes. I have acknowledged bloggers who are in Technorati's Top 100 Finance blogs by showing their 8/31/2010 rank in parentheses. Finally, for some submissions, I have added my perspective and comments relative to the post topic.

And now onto the Carnival:

Earning

Christina Crowe presents 10 Practical Ways to Make a Living Online posted at Cash Campfire, saying, "Could entrepreneurs really be taking over the economy? This was one question Amy Cosper, Editor-in-Chief of Entrepreneur Magazine, posted in the December 2009 issue of the publication. This guide is meant to be a resource to help you make a living online. A simple list of ideas or suggestions to help you achieve your online goals, if you will, that will point you on to the right path. Test them, practice them or devote your time to them. You can control your own future." For me, online approaches can have low start up costs which make them attractive to try.

Investing

Dividends4Life presents 8 Dividend Stock Delivering Good News posted at Dividends Value, saying, "If you closely follow the daily financial news as presented by the mainstream media, it is easy become jaded and start believing that there isn’t any good news out there. Don’t be confused by the noise. There are still many great companies committed to generating superior returns and rewarding their shareholder by increasing cash dividends."

Mike Piper (#4) presents TIPS vs. Nominal Treasury Bonds posted at The Oblivious Investor, saying, "When does it make sense to use inflation-protected bonds, and when does it make sense to use the traditional nominal Treasury bonds?" At the current levels of government spending, I believe inflation is a given. So do a lot of other investors. The TIPS we own are currently selling at 10 to 15% premiums over face value.

Living Frugally

BWL presents Should You Sell Your Car or Repair It? posted at Christian Personal Finance, saying, "A look at the always difficult to answer question: should I sell my car or repair it?" Since we are trying to keep our cars at least 10 years, our question is " Repair it or buy another car?" At seven years, our answer is still repair it. When we do buy, we plan to pay cash.

Retiring

FIRE Getters presents Three Good Habits of Successful Retirees posted at FIRE Finance, saying, "Vanguard's chairman and CEO Jack Brennan has nearly three decades of valuable experience in investing at this great firm. He has observed that successful long term investors share some common traits. Here is our spin to his observations."

Saving

Pfstock presents Pay The Early Withdrawal Penalty? posted at DC's Personal Finance and Stock Investing Blog, sharing, "If CD or money market rates go back up to the 4-5% range, I intend to close my CD account, pay the penalty, and establish a new account at the higher rate. I already did some back-of-the-envelope calculations that show I would be much better off doing that even after having to pay an early withdrawal penalty.'

Freefrombroke (#1) presents Seven Ideas To Set Up SmartyPig Goals posted at Free From Broke, saying, "An important aspect of saving is having a goal to save towards. Here are 7 savings goals you can set up in SmartyPig (or anywhere else)." Having goals is a great idea. Retirement and college education are two important goals that we included for our list.

Monday, August 30, 2010

A common mistake I've observed is the practice of working on adjacencies when the core business area is having problems. If the core business is weak, it is likely the adjacencies will have problems also. One reason is the issues affecting the core business will likely be present for the adjacencies. Another reason is that adjacencies will dilute resources which are already having difficulty building a strong core business. For example, a restaurant that is a weak business would probably not benefit from expanding into an adjacency such as catering. It would be better for a restaurant with a strong business to consider expanding through a catering adjacency. The principle of a strong core also applies to the area of personal finance.

To me, a career is the core for income generation. Unfortunately, it took me about 12 years to figure that out. From then on, I focused my efforts on maximizing income from my job. During that time, I advanced two levels and quadrupled my compensation. Prior to that, I was looking at alternative sources of income (adjacencies) such as rental property and franchise opportunities, which distracted me from focusing on my core.

For us, my company stock was the core for our retirement savings. While this is a risky strategy, we were fortunate that the stock grew faster than the market index and inflation. From this core, we have expanded to other stock and bond investments which have lowered the risk for our retirement portfolio.

In retrospect, the focus on making a strong core provided greater returns than spreading our efforts across multiple adjacencies. With a strong core, we were also better able handle losses that might occur from trying adjacencies.

For more on Strategies and Plans, check back every Monday for a new segment.

Saturday, August 28, 2010

Even though the season technically ends on September 22, the summer of 2010 is over for us. Here are our signs of the end of summer:

Start of school. In our area, schools usually start the last full week of August. Since our daughter will be attending kindergarten, she has a delayed start and will begin next week. As my daughter gets older, I expect our summer will end with the August practices that begin before school starts.

More traffic congestion. With the start of school, buses are making multiple stops on the back roads I like to use. As the local colleges ramp up, traffic congestion on our highways also increase.

Shorter hours or closings. Daylight hours are getting shorter. Recreation venues are reducing their hours and outdoor pools are closing on Labor Day weekend. Amusement parks are moving to weekend hours only.

Back to a weekday routine. Our summer consisted of a smorgasbord of activities and events for three months. Our daughter had four to five camps that cover sports, art and nature. We attended festivals, visited parks, participated in kid activities, and took weekday day trips. Now that our daughter will be attending school, special activities will be scheduled for the weekends.

This summer sure went by fast. Maybe because it's our daughter's last summer before school. Maybe, it's we were very busy but didn't do everything we wanted. Probably, it's just because I'm a lot older :-)

For more on Reflections and Musings, check back every Saturday for a new segment.

Thursday, August 26, 2010

House Fades as Means to Build Wealth by David Streitfeld of The New York Times reports that housing should no longer be considered an investment. Housing has reverted to being a home, a place to live, as it has primarily been in the past. Only in the second half of the 20th century was housing used an investment, especially by inhabitants of both coasts. Since World War II, housing rose by 1.1% annually when adjusted for inflation. In the 1990's, housing rose by 4% a year over inflation.

According to the article, it is likely that housing will only keep up with inflation and that is a best case scenario. In the worst case, housing may actually depreciate but at a much slower rate than other goods, such as automobiles.

My parents and I benefited from the housing boom. My parents were able to sell their first two homes for a large gain. This contributed significantly to growing their wealth. On the other hand, their final home, which was purchased in 2000, will likely sell close the the price they paid. While we were able to sell our first house for 2.5 times what we paid, I expect we'll see little appreciation for the home that we've owned since 2003.

Overall, this is bad news for people who used their home as retirement savings. Many are probably close to or in retirement. The good news is for those just looking for a place to live; housing will be reasonably priced for quite a while. Housing may become very affordable again for those who are just graduating from college and younger.

For more on Crossing Generations, check back every Thursday for a new segment.

This is not financial or housing advice. Please consult a professional advisor.

Wednesday, August 25, 2010

One of my favorite personal finance principles is "Pay yourself first." By paying ourselves first, we guaranteed that we were increasing our wealth every time we received a paycheck. For us, "first" meant before we paid any other bill including our mortgage, utilities, insurance premiums and credit card balances. At the time I retired, we were saving about 20% of my salary before paying our bills and spending the rest.

I didn't always pay myself first. During my first year of working, I ran out of money three days before a monthly paycheck. Fortunately, I had no major bills due during those three days, and only had to deal with being uncomfortable with having no cash. After that, I tried to have a little leftover at the end of each month and transferred that amount to savings. When I was given a raise, I tried to live within the same budget and put the excess amount into savings. However, in the beginning, I waited until the end of the month to put unspent money into savings.

At some point, I don't remember when, we began transferring money to savings immediately after receiving my paycheck. The automation enabled by electronic banking made this easy to do. With each raise, we would increase the amount put towards savings. Eventually, we achieved saving 20% of our salary.

I attribute a lot of our financial success to principle of paying ourselves first. This strategy helped us to grow wealth, minimize debt and take an early retirement.

For more on The Practice of Personal Finance, check back every Wednesday for a new segment.

It's been over four years since I started My Wealth Builder. As I think about topics to write , I often remember, "I've written about that before," and decide to find a new topic. However, since many principles of personal finance are timeless, I want to include them in a recent post on My Wealth Builder. Therefore, I am starting a series called "Timeless Articles from the Archives" that will highlight posts from the same week in 2006-2009.

In the week of 2007, I wrote about Three Ways to Make Money Investing. Even after the recent bear market, I still believe these ways will work in the future. Of course, there is no guarantee :-)

Welcome to third edition of The Wealth Builder Carnival. The purpose of this carnival is to collect articles from the blogosphere on building, preserving and keeping enough wealth for a comfortable retirement. For reference, I have tried to keep the carnival content tightly focused on wealth building. As a result, this carnival did not include submissions that were off topic, e.g. those about debt, debt management, debt reduction, credit scores, credit card evaluations, or account opening bonuses.

For this carnival, I have organized the posts into seven categories: Earning, Investing, Insuring and Protecting, Living Frugally, Retiring, Saving and Taxes. I have acknowledged bloggers who are in Technorati's Top 100 Finance blogs by showing their 8/23/2010 rank in parentheses. Finally, for some submissions, I have added my perspective and comments relative to the post topic.

Investing

Dividend Growth Investor (#63) presents Six Notable Dividend Increases for the week posted at Dividend Growth Investor saying, "Of particular interest to many dividend investors are companies which are able to raise earnings, which fuels future dividend growth. As a result, investors in those companies have much better chances of generating an income stream which meets or exceeds the rate of inflation."

Dividends4Life presents 16 Confident and Secure Companies Boosting Dividends posted at Dividends Value saying, "Are you confident and secure in your investing process? It appears many people are not. We must follow a process we are 100% confident in. Doubt is the gateway to destructive behavior. For me, dividend growth investing is what I am confident and secure in." With the stock market in a trading range, I believe that dividend paying stocks are a good option for us.

freefrombroke (#1) presents Why Invest In Stocks posted at Free From Broke saying, "Though many are reluctant to invest in stocks these days, stocks can still provide excellent long-term growth for an investor."

Silicon Valley Blogger (#4) presents Own Stocks For The Long Run posted at The Digerati Life saying "Any student of markets should know some indisputable facts about the long-term performance of the stock market. The stock market has outperformed any other asset class out there."

Retiring

Kristine McKinley presents Getting the Maximum Social Security Benefits posted at Social Security Retirement Income, saying, "Here are some tips to help you get the maximum Social Security benefit you are entitled to. Your retirement benefit is based on your top 35 years of earnings so it’s important to get as many 'high earning' years in as possible. If you’re at the top of your career as far as income goes, working just one year longer in a high paying job could make a big difference in your retirement benefit."

Saving

Pinyo(#2) presents Automate Your Savings Accounts posted at Moolanomy, saying, "When you automate your savings accounts, you can force yourself to practice financial discipline — and work toward financial freedom." I agree. Paying ourselves first was an important element of our wealth building plan.

Monday, August 23, 2010

As we move money back into the stock market, one area of focus will be large cap, dividend paying stocks. Here are some reasons for using this approach:

Dividends are a large part of stock market returns. Over the past 100 years, dividend accounted for about 40% of the stock market returns. With the market in a trading range, I expect that dividends will account for over 40% of returns in the near term.

Dividends can mitigate losses during a market decline. Higher dividend, quality stocks may fall less when the stock market declines since the share holder will receive a quarterly payment of holding the stock. As the stock price falls, the dividend yield rises. With higher yields, more investors buy the stock which slows the decline of stock price.

Dividends may be federally tax free. For those in the 15% tax bracket, dividends are exempt from federal taxes in 2010. This tax break may be extended with other Bush tax cuts due to expire at the end of 2010. For tax brackets above 15%, the tax rate for dividends is only 15% in 2010.

For now, we are considering stocks with dividend yields in the 2.5% to 7% range. In addition, we are not buying securities which are limited partnerships due to the tax complexity of owning the shares.

Stocks we are considering include the following companies: Intel (INTC), Phillip Morris (PM), Boeing (BA) and Johnson & Johnson (JNJ). I have already purchased and sold Verizon (VZ) and Altria (MO) which I may buy back if the market declines.

Disclosures: At time of publication, we own Intel and Phillip Morris in our trading accounts and Boeing in our managed accounts.

For more on Strategies and Plans, check back every Monday for a new segment.

In our case, we were already doing the first seven before retiring and continued doing so in retirement. Where we differ is in the last three categories. For #8, we continue to have two cars and will keep them until a replacement is need. At that time, a single car may be an option we consider. For #9, we plan to live in our current home for at least 15 years which is when our daughter will graduate from high school. Finally, we are considering doing more traveling because we realize life's short and getting shorter.

For more on Reaping the Rewards, check back every Friday for a new segment.

Thursday, August 19, 2010

In my area, just about every school district will have a tax levy on the November 2010 ballot. The levies have a wide range of purposes that include operating expenses, teacher raises, and, in one case, demolition of a current school building to build a new one at the same place.

Back to School? Bring your own toilet paper reports how more schools are asking students to bring in various materials, including those that the school is expected to supply. My daughter, who is attending kindergarten next year, is required to bring a number of items for use by the entire class, including crayons, glue sticks, a ream of copy paper, a box of tissues, and plastic storage bags. She is also required to pay an additional $35 fee for supplies.

To me, the requested supplies and fees are just another form of taxes being imposed without a school levy vote. When I attended, all I needed to bring were my own notebooks, pens and pencils. My teachers may have paid for supplies that they reused each year, such as materials for the bulletin boards. Otherwise, my school provided virtually everything that was needed for class.

Overall, I'm not opposed to my daughter providing materials for the class to use. However, people should acknowledge that the cost is really another tax increase for the middle class.

For more on Crossing Generations, check back every Thursday for a new segment.

This is not financial, tax or education advice. Please consult a professional advisor.

Wednesday, August 18, 2010

It's been over four years since I started My Wealth Builder. As I think about topics to write , I often remember, "I've written about that before," and decide to find a new topic. However, since many principles of personal finance are timeless, I want to include them in a recent post on My Wealth Builder. Therefore, I am starting a series called "Timeless Articles from the Archives" that will highlight posts written during the same week in 2006-2009.

My Wealth Builder was started on August 13, 2006. Since it was my first week of posting, I wrote a lot of timeless articles:-) That week's articles were focused on saving, investing and frugal living. In Saving is the Starting Point, I wrote,"Saving was the first thing I needed to do to create wealth." I still believe that saving is the foundation of building wealth, even after the financial crisis we've experience. In The Only Saving Strategy You'll Ever Need , I shared the "pay yourself first from every paycheck" savings strategy. Your Savings Goals shared our priority for saving: emergency fund, retirement, college and buying large ticket items. In The Really Reallies, I wrote about our investment strategy of focusing on CDs that were paying 5-6%, when people believed interest rates would go higher. That strategy helped minimize our losses during the stock market crash in 2008-09. We still own some of those CDs today, which vindicated are decision to be a contrarian. To wrap up the week, I wrote about frugal living in Buy Only What You Need, which we still practice.

Tuesday, August 17, 2010

Welcome to second edition of The Wealth Builder Carnival. The purpose of this carnival is to collect articles from the blogosphere on building, preserving and keeping enough wealth for a comfortable retirement.

For this carnival, I have organized the posts in seven categories: Earning, Investing, Insuring and Protecting, Living Frugally, Retiring, Saving and Taxes. I have acknowledged bloggers who are in Technorati's Top 100 Finance blogs by showing their 8/16/2010 rank in parentheses. Finally, for some submissions, I have added my perspective and comments relative to the post topic.

And now onto the Carnival:

Earning

Gal Josefsberg presents How To Get A Raise posted at Equally Happy, saying, "Have you ever considered whether or not you deserve that raise you want? We all think we deserve more money, but do we really?" The key is deliver much more value to a company than one is paid.

Investing

Dividends4Life presents 3 Signs of an Impending Dividend Cut posted at Dividends Value, saying, "Most investors are not surprised when a company cuts its dividend. They saw the early warning signs well in advance of the actual cut. Here are three signs that a company is heading toward a dividend cut."

Dividend Growth Investor (#63) presents 24 Dividend Paying Companies Confident in the Economic Rebound posted at Dividend Growth Investor, saying, "It is interesting to note than when management expects rosy business conditions in the next two to three years, dividends have a higher chance of getting raised. Back in 2007 and 2008 when the economic picture was particularly gloomy, the boards of directors of many companies cut dividends in anticipation of financial Armageddon. While the economic situation is not as good as it were during the 1990’s, nevertheless the boards of many companies have started raising dividends at an increasing pace. This is a bullish sign, as it shows that managers are mostly optimistic for near-term business conditions."

BWL presents No Fee Roth IRAs At Scottrade posted at Christian Personal Finance, saying, "Don't you just hate being charged an annual "IRA fee"? Me too, but finally a broker is deciding to do away with it..." Low fees are a good way to increase investment returns. I checked with the brokers I use, Charles Schwab and TDAmeritrade, and both also do not charge annual fees for IRAs.

Living Frugally

FMF (#5) presents Two Mind Hacks to Lower Your Expenses posted at Free Money Finance, saying, "Two unique ways of looking at money challenges that can leave you much better off financially." I like this idea. By reducing my living expense, I can reduce the amount of savings needed for retirement. Although not mentioned, I could probably put more to savings each month by using these mind hacks.

Lauren Mendel presents Running on a Budget posted at Richly Reasonable - Successes and failures, all in the name of living reasonably., saying, "A gym membership can get pricey, particularly if you're not sure that you'll use it enough to make it worth your while. Family-style programs are a little more cost efficient, but a single membership can sting you right in your budget." I agree that there are many low or no cost ways to exercise. Also, I like "pay as you go" options. As a retiree, I can pay for only those months that I am using the gym, which typically is in the winter. During the summer months, we choose the "free options" to exercise.

Saving

Taxes

Arjun Rudra (#78) presents How To Make Your Mortgage Interest Tax Deductible posted at Investing Thesis, saying, "For US homeowners, mortgage interest is automatically tax deductible. But for Canadians, the write-off is not so straightforward. In order to make your mortgage interest tax deductible, homeowners must be able to prove that the money is being reinvested and is not being used for personal expenses."

Monday, August 16, 2010

During this economic recession, I've noticed many retailers are more generous with coupons. In some cases, a retailer has accepted an expired coupon or provided one on request. In most cases, I'm using a coupon for a planned purchase, one that I would have made with or without a coupon. Thus, a coupon is pure savings.

Here's my plan for finding coupons for future significant purchases:

Regularly check coupon mailers. We receive monthly coupon packets and magazines in our area for restaurants and local retailers. Recently, we needed our water heater replaced and the store we selected had a coupon in the mailer.

Search the Internet. Our water heater company also had the same coupon on their website, in case the paper one expired. As it turns out, they gave me the coupon discount just for mentioning the coupon on the phone.

Last week, I needed a major car repair and didn't have any coupons from the dealer covering the repair. I searched the Internet, and found a coupon for a 10% discount on the parts which the dealership honored. In fact, when I ordered the parts over the phone, I was given the 10% discount by mentioning the coupon.

A couple of local retailers have told me they have 10-20% off coupons regularly on their websites.

Ask for a coupon. When I arrived at the service department, I showed the representative a related coupon and asked if any apply. He responded with, "No, but you can use this $20 off coupon that we have." It was a flyer the dealership had distributed and, even though it was expired, they reduced my price by $20.

Overall, the coupons saved us $25 for a water heater and $70 on my car repair for the company we had already decided to use. Pretty good return for about 30 minutes worth of effort.

For more on Strategies and Plans, check back every Monday for a new segment.

Sunday, August 15, 2010

August 13, 2010 was the four year blogiversary of My Wealth Builder. Two major changes are planned for this year:

The Wealth Builder Carnival. I have initiated The Wealth Builder Carnival to collect and share posts from the blogosphere on the topic of wealth building, which I feel is a goal of many personal finance bloggers. The carnival categories will include earning, saving, investing, insuring, living, retiring and taxes. The inaugural edition was published on August 10, 2010 and a new edition will follow each week.

Timeless Articles on Personal Finance series. I believe many good practices of personal finance are timeless; they apply in good and bad times, and across generations. Each week, I will be reviewing the articles from the same week in previous years and picking the timeless posts worth sharing again. This series is will be published weekly beginning on August 18, 2010.

I'm looking forward to an exciting fifth year for My Wealth Builder.

Here are some fun facts related to My Wealth Builder from the past four years.

Friday, August 13, 2010

In my post Over Delivered and Over Committed, I wrote about how I was feeling over committed by my five part time jobs, which were happening concurrently. Three of the jobs were 1- 5 hours per week and one job was 10-12 hours a week. The fifth job, which was a temporary job and has concluded, required 30 hours per week, but had a very flexible schedule and was projected to last 3-6 weeks. It seemed like an interesting proposition so I took the job, which led to some 40+ hour work weeks in the short term.

Since all of my jobs are part time, seasonal and temporary, I never considered working them would make me "not retired." However, a couple of readers commented that they don't consider working 40+ hours a week as being in retirement, no matter what type of job or the length of the job. One reader commented being "legitimately retired" is not having to work and that a person working only 20 hours was not retired if "THEY HAVE TO WORK (sic)to sustain themselves financially."

Although I had not previously thought about it, I think the readers asked a very good question, "Does working disqualify me as being retired?"

First, I'd like to start with a definition from the Merriam-Webster Dictionary for retired -"withdrawn from one's position or occupation : having concluded one's working or professional career." To this definition I would add, " living primarily on savings, retirement accounts, pension or other retirement benefits (e.g. social security, health insurance, etc.) and plan to do so for the rest of their lives." To me, meeting both parts of the definition would qualify a person as being in retirement.

Here's how our situation compares to the two parts:

Concluded our professional careers. Both my wife and I have stopped working in our professions. My wife retired from her career after 15 years when we moved for an international assignment. She did not start working again when we returned. I retired after from my field after working 27 years for one company. Neither of us have worked or are working in the positions, occupations or professions from which we retired.

Living primarily on saving, retirement accounts, pensions and other retirement benefits. Currently, we are living on our savings accounts and getting health insurance covergage from my company. When we turn 59 1/2, we'll be able to access our retirement accounts without penalty. At 62, we'll be able to apply for and receive social security payments. Theoretically, we have sufficient funds to last into our nineties.

Working various part time jobs. Since retiring, I have been working at different seasonal part time jobs in the financial and education fields for my personal development and to earn some money. Due to the recession, I had a goal of earning 20% of our monthly expenses to reduce our withdrawal rate until the stock market recovered. In 2008 and 2009, I earned about 10-15% of our expenses. However, in 2010 it appears I will have a one year windfall of earning 40% of our expenses mainly because I received accepted a couple unexpected job offers, which caused the short term work overload. Next year, I expect to be back to earning about 20% of our living expenses, since one of the jobs no longer exists and I won't be reapplying to another.

For now, I believe we currently meet the definition of being in retirement. However, if I started a new career in a full time permanent job, I would consider myself out of retirement and back to working. Hopefully, a poor economy and falling stock market won't make that decision for us :-)

For more on Reaping the Rewards, check back every Friday for a new segment.

This is not financial or retirement advice. Please consult a professional advisor.

Tuesday, August 10, 2010

Welcome to the inaugural edition of The Wealth Builder Carnival. The purpose of this carnival is to collect articles from the blogosphere on building, preserving and keeping enough wealth for a comfortable retirement.

For this carnival, I have organized the posts in seven categories: Earning, Investing, Insuring and Protecting, Living, Retiring, Saving and Taxes. I have acknowledged bloggers who are in Technorati's Top 100 Finance blogs by showing their 8/10/2010 rank in parentheses. Finally, for some submissions, I have added my perspective and comments relative to the post topic.

And now onto the Carnival:

Earning

FMF (#6) presents How to Ask for a Raise posted at Free Money Finance, saying, "One sure way to grow your income is to ask for raises when appropriate. This post tells you how to do so." A great article. Making more money is a necessary ingredient to building wealth.

passive family income presents How To Earn Passive Income At Home posted at Passive Family Income, saying, "In these tough economic times many people wonder how to earn passive income at home. When you consider the global economy, the growing job reductions, and the fact that a lot of companies are downsizing their operations to keep their business afloat it’s no wonder that we are looking for a better, and easier way to live." For some, when earnings become large enough, passive income activities can become the main job, with perhaps more flexibility.

Investing

Super Saver (#53) presents Where to Invest? posted at My Wealth Builder, saying, "Low interest rates have caused us to rethink our investment strategy." Stocks are looking more and more attractive.

Dividends4Life presents 19 Stocks Using Real Cash To Pay Higher Dividends posted at Dividends Value, saying, "Are you looking for companies that can sustain and grow their dividend? In making that determination, a company’s Statement of Earnings is one of the last places you should look. Cash is king for the dividend investor and the Statement of Cash Flows is where astute investors begin when they want to understand the viability of a company." With dividends in the 3-5% range, good dividend paying stocks are an option worth considering for our investment portfolio.

Arjun Rudra (#82) presents Searching For High Return On Equity Companies With Jason Donville of Donville Kent Asset Management posted at Investing Thesis, saying, "ROE is a very good yardstick by which to measure how well the management of a company creates value for its shareholders. However, as with everything the ROE statistics has it foibles and can be artificially inflated. To dig a bit deeper into what ROE is and how it translates into investment performance, we are super excited today to present to you an interview with a portfolio manager that relies heavily on the use of return on equity as a screening tool."

Dave presents Food Prices To Soar posted at Cheapo Groovo, indicating that it may be a good time to invest in an agricultural ETFs or ETNs. My conclusion is that inflation may be coming sooner that we think :-)

Retiring

J.D. Roth (#17) presents What is Retirement? posted at Get Rich Slowly, saying, "For most people, retirement is their eventual 'life destination', and many dream of retiring early. But what does retirement even mean? How does it differ from pursuing your passions?" I agree that the definition of retirement is evolving. For us, we have chosen a more traditional definition of being able to live primarily off our savings, retirement accounts, and pension payments for the rest of our lives.

BWL presents How to Build a CD Ladder posted at Christian Personal Finance, saying, "Many retirees draw income from CDs since they are a more conservative investment. This article shows explains the benefits of using a CD ladder." We like this idea and been using CD ladders for the past 10 years. The current low interest rates have made this strategy less attractive for us. Hopefully, we'll see better interest rates in the next few years.

Saving

Marie Joseph presents Have you really looked at how much money you made? posted at Moneymonk, saying, "And have you matched it with how much you have in your bank account?" Before retiring, we were saving over 20% of our income. It was a big factor in helping us retire in our forties. Moneymonk is even a bigger saver at 30% of her income.

Monday, August 09, 2010

From 2006 to 2009, I had purchased municipal bonds and CDs that were pay 4-5% a year, with the intent of holding the securities to maturity. However, I am now selling some of the bonds in our taxable accounts. Here are the reasons:

Our bonds are selling at 3-5% premiums. Due to declining interest rates, the bonds and CDs are priced 3-5% over what we paid. Thus, we would make a unexpected profit from selling the bonds.

The capital gains are tax free. Since we still have a capital gain loss carryover, all gains will tax free. On the other hand, all interest received is taxable since it cannot be offset by the capital gain losses.

Inflation is coming. Although inflation is low now, I expect inflation to be much higher in the future. The bonds have a premium since the current interest rate is lower than the bond interest rate. However, if interests should rise significantly due to inflation, the bond could fall below the price we paid. In addition, we would be locked into a lower interest rate until the bond matures.

Generate cash. In the near term, I believe that stocks are the where I want to invest. Selling the bonds will create cash for stock investment opportunities that arise. Hopefully, the total return will be able to match the 4-5% interest payments from the bonds. To do this, I will be focusing on dividend paying stocks.

For now, we will keep the bonds in our non-taxable IRA accounts, since there is no tax benefit to taking the profit earlier. In addition, most of the CDs mature by 2013, with only the TIPS bonds maturing later.

For more on Strategies and Plans Ideas, check back every Monday for a new segment.

This is not financial or investing advice. Please consult a professional advisor.

Sunday, August 08, 2010

Next week will be My Wealth Builder's fourth blogiversary. During the week, I will be making some major updates, since the last design and content changes were made to My Wealth Builder 19 months ago. Here are the main areas of change that will be happen next week:

Past articles on personal finance. I believe many good practices of personal finance are timeless; they apply in good and bad times, and across generations. Each week, I will be reviewing the articles of the same week from one, two, three and four years ago and picking the timeless principles worth sharing again. The title of this series is Timeless Articles on Personal Finance and a segment will be published weekly beginning on August 18, 2010.

The Wealth Builder Carnival - I have initiated this carnival to collect and share posts from the blogosphere on the topic of wealth building, which I feel is a goal of many personal finance bloggers. The carnival categories will include earning, saving, investing, insuring, living, retiring and taxes. The inaugural edition will be published on August 10, 2010, with a new edition following each week.

Sidebar content - The elements in the sidebars are modified or relocated to make it easier for readers to navigate.

Hopefully, the changes will make My Wealth Builder a more enjoyable experience for readers.

For more on New Beginnings, check back every Sunday for a new segment.

Saturday, August 07, 2010

When I was a younger, I never worried about how long I would live. Thus, I never developed a life list outlining the experiences I wanted to have. For most of my life, I felt closer to the beginning than the end. I expected that I would have enough time to experience everything I wanted. However, now that I'm in my fifties, I definitely feel the end is closer than the beginning. This is confirmed by the Social Security life expectancy calculator which estimates I have an average of 30 years remaining.

For most of my life, I didn't feel rushed to see many of the natural wonders in North America, e.g. the Grand Canyon, Yellowstone, etc. Now I feel a greater sense of urgency to visit these sites, when I think there are about 20 summers left in which to travel since we have a five year old daughter. We'll need to make definite plans each summer to visit at least one site. Hopefully, our daughter will appreciate the major summer trips:-)

As for other life experiences, I'm satisfied with what I have done. My remaining life experience to complete is to raise our daughter successfully to adulthood. For now, I don't feel that there are any major missing life experiences I need.

For more on Reflections and Musings, check back every Saturday for a new segment.

This is not financial or personal development advice. Please consult a professional advisor.

Wednesday, August 04, 2010

Over the past two years, our bond investments have done very well. From 2006 to 2008, I purchased a significant number of bonds paying interest rates of 4-5%, with the intent of holding all of them to maturity. As interest rates have declined, the value of the bonds have increased by 4-5% and as much as 12% in one case.

At first, I was glad the bonds we owned paid 4-5% each year and increased in value by 4-5% since being purchased. It has been one of the few bright spots in our investment portfolio. Lately, I've been thinking that results are not sustainable, and that this may be a bond bubble. After all, these great returns are the result of the low interest rates courtesy of the Fed and a flight to safe investments. Bond values would decline significantly if the Fed raises rates or investors move out of bonds.

Since I expect interest rates to rise longer term, our bond values are at risk of falling. Fortunately, most of our bond maturities are under 3 years making the bond market risk relatively low. We could always wait for the bond to mature and recover 100% of the principal. However, since I believe the current level of interest rates is unsustainable, it makes sense to sell the bonds and take the profits. After all, there is a high probability the price of the bonds will decline in the future.

As it turns out, selling bonds is not quite as easy as selling stocks. First, I need to have a bond specialist get quotes from the market makers. If I agree to the quote, the bond is sold at that price. Tomorrow, I will find out what the market makers are willing to pay. If the price allows me to make a 3-5% profit, I will sell and hopefully miss the bursting of a bond bubble.

For more on The Practice of Personal Finance, check back every Wednesday for a new segment.

This is not financial or investing advice. Please consult a professional advisor.

Monday, August 02, 2010

Now that we've created stability for funds we need in the short term, we are moving our longer term retirement savings back into the stock market. Overall, I still believe it is right to have faith in the historical long term returns of the stock market.

The private sector is a resilient group, especially those with a significant global presence, and it will come out of this recession stronger than ever. The earnings reports last quarter are supporting this point, with some companies having their best quarter ever. The only missing component is jobs growth, which will come once companies believe the economic recovery is sustainable. I believe that confidence will come in the next year, as record profits continue to be delivered.

In anticipation of a bull market resuming, I have started using the Modified Unemotional Growth Investor system again, which was used to create the Q1 2007 stock pick list post. I found the system to be most successful in an advancing market, which I expect to see soon again.

For more on Strategies and Plans, check back every Monday for a new segment.

This is not financial or investment advice. Please consult a professional advisor.

About Me

My wealth goal is to create a guaranteed yearly income stream equal to my highest salary for my retirement years. While I have developed a strategy to do this,
I am interested how others are thinking of achieving financial security for retirement.
This blog is a summary of facts, ideas, discussions, and action plans to achieve that goal.

Disclaimer

This is a personal blog about my thoughts, experiences and ideas on building wealth. The contents of this blog are for informational purposes only. No content should be construed as financial advice. Commenters, advertisers and linked sites are entirely responsible for their own content and do not represent the views of My Wealth Builder. All financial decisions involve risks and results are not guaranteed. Always do your own research, due diligence and consult your own professional advisor before making any decision. My Wealth Builder assumes no liability with regard to financial results based on use of information from this blog.

If this blog contains any errors, misrepresentations, or omissions, please contact me or leave a comment to have the content corrected.

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Disclaimer:
This is a personal blog about my thoughts, experiences and ideas on building wealth. The contents of this blog are for informational purposes only. No content should be construed as financial advice. Commenters, advertisers and linked sites are entirely responsible for their own content and do not represent the views of My Wealth Builder. All financial decisions involve risks and results are not guaranteed. Always do your own research, due diligence and consult your own professional advisor before making any decision. My Wealth Builder assumes no liability with regard to financial results
based on use of information from this blog.

If this blog contains any errors, misrepresentations, or omissions, please contact me or leave a comment to have the content corrected.